Against Home Rule (1912) eBook

It may be said that the nationalisation of railways
could be carried out, not by a cash payment, but by
a paper exchange of existing Railway Stocks into newly
created Irish Government Stock, the amount of the
existing net receipts being guaranteed. But, unless
the Irish Government could actually borrow in cash
the sum required, at a rate equal to that nominally
put on the new stock, the shareholders would be robbed
of a capital sum equal to the amount of the discount
on the stock, i.e. the amount of the market
quotation below par, or issue price. There will
be sellers of the new stock from the beginning, and
what the public will give for it, and not the nominal
figure put upon it by the Irish Government, will be
its real value. The Irish Government may issue
the Railway Stock at 3-1/2 per cent., but if they
could borrow the sum required only at 4-1/2 per cent.,
the new stock will at once find its level at about
77 instead of 100, and the capital value of Irish
railways will be reduced from, say, L45,000,000 to
L35,000,000, and the difference, L10,000,000, would
come out of the pockets of Irish shareholders.
The Irish Government would be, however, in this unpleasant
dilemma, that if they issued the stock at a rate per
cent, nominally higher than the present return in
railway capital, namely, 3.77 per cent., the annual
charge for interest would be greater than the net
receipts, and so from the beginning there would be
an annual loss; and the fact of this annual loss would
be another factor tending to depreciate the new Railway
Stock. The alternatives before an Irish Prime
Minister, pressed to carry out a “Nationalisation”
policy, are not enviable. He will either have
to provide by taxation for the annual loss involved
in taking over the railways on a fair basis, or to
deprive the most thrifty and industrious classes of
his fellow-countrymen of a large slice of their savings
and investments. In either event, the new Government
will have received a serious blow to its credit at
the outset of its career.

EFFECT OF REDUCTION OF RAILWAY RATES.

There is, moreover, a special reason why such a stock,
from its inception, would tend to depreciate in value;
namely, that from the moment the Irish Government
or their nominees became the owners, there would be
almost irresistible pressure put upon them to reduce
the railway rates, and generally (as indeed the Majority
Report recommends) to work the railways on other than
commercial lines.[99] A reduction of rates has been
held out as the great resulting boon of nationalisation
ever since the Irish Parliamentary Party specifically
raised the question in Parliament in 1899. A
25 per cent. reduction in rates and fares (suggested
by Nationalist witnesses) would involve an annual
diminution of net receipts to the Government of over
L1,000,000 per annum, and if the reduction were in
goods rates alone, the loss would be L568,000 per